Are foreign funds sitting on a pile of cash just ahead of the year-end? The rupee movement sure indicates as much.
MUMBAI: Are foreign funds sitting on a pile of cash just ahead of the year-end? The rupee movement sure indicates as much.
Data released by the Securities Exchange Board of India (Sebi) shows that foreign funds have pulled out close to Rs 5,000 crore or $1.26 billion from the stock market in the last three days (including Wednesday’s provisional number).
However, the rupee’s movement hasn’t reflected the pullout as the Indian currency has moved just 9 paise to close at Rs 39.59 per $1 on Wednesday from Monday’s close of Rs 39.50 per $1.
They seem to be in no hurry to convert the rupees into dollars to send back home, dealers said. “Maybe they’ll invest at more stable levels.”
Another senior dealer with a European bank, who remains anonymous since he isn’t authorised to speak, said foreign funds are holding on to see what happens to the dollar till the year-end because there are some expectations that the rupee could weaken.
“But more importantly, they don’t have any other place giving them such high returns so they would rather hold on and invest in Indian stocks next month after their fund allocation exercise for the year is over.”
In every year-end there is a typical lull as global markets switch to a holiday mood. But this year the lull has been accompanied by caution following the huge meltdown in the US home loans market and the global credit crunch that the move engendered.
Besides, the rupee has also been supported by dollar sales by exporters.
“Exporters are selling (dollars) at every uptick and though the rupee may have not moved much a 20 paise downward move is quite big considering that the rupee is considered to be an appreciating currency,” said a dealer with a US bank.
He expects the rupee to shed gains gradually even if the Sensex falls by 1,000-2,000 points.
Dealers and analysts continue to be bullish on the rupee with some like the US-based investment bank Goldman Sachs expecting the local unit to strengthen to Rs 37.70 per $1 by April 2009.
r_joel@dnaindia.net
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